This Blog will basically discuss economic issues, with some history and political events thrown in. The author is a mix of Conservative and Liberal impulses, with matching Authoritarian and Libertarian trends.

Tuesday, April 20, 2010

The idea of Taxes

The appearance of things in China lead me to ask some serious questions, most centering around the existence of Consumer Demand in China for fixed placement assets. The Real Estate is simply too upscale for Chinese households to pay for considering their Income. Other Consumption Goods are also targeted for higher Incomes rather than that which the average Chinese household can afford. One has to ask what will be the end loss, after all such Goods must endure a period of degradation before Chinese will be viable as Consumers; this means, by the way, that at least half of the Investor principal must be lost. Sensible Investors will long have abandoned the Chinese investment market; those left suffering real losses.

Joseph Stiglitz writes a very good Piece, except that it is way too long! It fits in nicely with the above message in stating there is insufficient Profit in investment for necessary Capital development, while the modes adopted for investment could never pay for itself; there not being a capable market for the Product. Consumer Demand insists on both desire for the Product, and the ability to pay for it. Consumer Credit was originally designed to cancel the restriction of ability to Pay, but the truth states Consumer Credit can only succeed in an environment of rising Wages or rising Inflation. Stiglitz praises the Governments of the Past far more than he should, which never managed any great Restart of any economy. The real Restart capacity of the economy comes from the Profits from Production not downgraded by the previous Recession, searching for new Investment opportunity and eventually finding it; Wars always seem to help. The important things is that the previous Investment made before the Recession was wrote off as loss.

This definition of the workings of the economies lead to a relative number of observations. The first must be that normal Production develops excess Profits; they in excess because of lack of investment opportunity with adequate Return. This suggests that the level of Taxation of those Profits can be much higher, without any effect made on the Capital construction. Investment profitability is the old Story of attempting to implant a middleman Cost into the Production cycle, it being a Profits center established as specific ratio of Production Profits. Investors always wonder Why it fails of performance under the Long-Run. Taxes could replace much of this attempt, replacing other taxation to pay for Government services, while not seriously deducting from the eventual overall Return to Investors over the real period of investment. Some might not understand this Statement, which simply says that the Investors will lose the Cash anyhow, because of worthless future investments. The Government can also attain much more of Investor Profits by the increased price of licensing of Capital constructions, again without any serious interruption of Investment schedules. I would hate to state that Taxes are good for you, but can state that taxing the right people is much better than taxing the wrong people. lgl